Creating an effective performance management program is critical for fostering employee engagement and conquering organizational goals — but many employers still find it a daunting task.
Only three per cent of organizations globally feel their performance management program provides exceptional value, found a Mercer survey, indicating that creating an effective program is challenging for most employers.
It remains a challenging area for most businesses, found Mercer’s Global Management Performance Survey, based on responses from leaders at more than 1,050 organizations from 53 countries.
Despite the difficulties in putting a good program in place, performance management is an essential tool for connecting employees with their organization’s goals.
“(Employees) set goals on an individual basis, but those goals are linked to the team and the organization’s strategy,” said Lynn Stoudt, principal at Mercer in Toronto. “It can also be a significant employee engagement motivator in many ways. People are looking for feedback in terms of how they’re doing.”
But implementing an effective performance management program can be a challenge that’s hard to pin down on any single factor.
“There are multiple reasons (why it can be challenging),” said Stoudt. “It goes back in many ways to (the) skill sets managers have to help deliver a good performance management program — that the individual employee feels that they’ve had good discussions with their managers, they understand the program, they understand their role in the program, and how all of those pieces are linked together.”
Linking performance to career development
The manager-employee relationship is one of the key drivers of effective performance management, found the survey.
“That’s really one of the key findings, I think — managers having resources and skills and competencies in working with their employees and having a good upfront goal-setting discussion, and having regular updates and providing regular feedback,” said Stoudt.
In Canada, holding candid discussions with employees had the most significant and effective impact on performance, found Mercer.
But those discussions can be difficult, particularly when a manager has to give constructive criticism, said Stoudt.
“It’s easy to tell someone they’ve done a great job — those are pleasant discussions to have. I think it comes down to if an individual is having some performance challenges, it’s sometimes easier not to have the conversation than to actually have the conversation.”
Other key drivers of successful performance management identified in the survey included executive commitment, calibration and technology.
Using those key drivers to create linkages between performance management and career progression is a highly effective way to get employees engaged in the process. But linking performance to career development can be overlooked, said Stoudt.
“It frequently does (get overlooked). I think more and more organizations are recognizing how important it is, so that whether an organization has a real formal career path that people follow or it’s more an informal structure, (it’s important) to have the opportunity during that performance discussion to say, ‘When you think about the next three years, where would you like to see yourself?’” she said, adding those discussions can feed into things such as education, training and development and succession planning.
“It can really support the organization from a business perspective going forward — what skills do we need? Where do we have them? If we have gaps, how do we close those gaps?” she said.
“There’s a real opportunity to understand how we can add more value in this program, from both the employee perspective, but from an organizational perspective as well.”
Fostering engagement, identifying top performers
Effective performance management is also an important tool for getting employees engaged in organizational goals and identifying and rewarding top performers.
“We consider it one of the key components around building and sustaining employee engagement,” said Tracey Malcolm, director at Towers Watson in Toronto. “And we can say that factually.”
Relationships with supervisors and managers are a key driver when it comes to employees staying with a company, found Towers Watson’s 2012 Global Workforce Study, which surveyed 32,000 employees.
And a performance management program that is clear about goals and objectives has an enormous impact on that, said Malcolm.
Many employers are in desperate need of that positive impact, found the study.
“The results are kind of troubling in that, globally, only 35 per cent (of survey respondents) said they were highly engaged,” said Malcolm.
“It speaks to the importance of this, because employees aren’t engaged — and (performance management) is a key driver of their engagement.”
Using performance management to identify top performers is one effective way to keep employees engaged.
“It is a great way to talk around performance expectations and job requirements, and, as a result, if you do have annual incentive plans and you need to differentiate, it gives you a way to provide that distinction between top performers and average performers,” she said.
“Differentiation does matter — you only have so many dollars and (performance management) is an important factor and component in being able to differentiate.”
So how can an organization create a performance management system that is as effective as possible for promoting employee engagement and connecting performance to organizational goals?
“(Keeping) it simple goes a long way,” said Malcolm.
“There are lots of frameworks and models that show the important relationship to business strategy but, at the end of the day, managers and employees need to be engaged around (understanding) what’s the business strategy and what does it mean to me?”
Public sector changes
The Treasury Board of Canada Secretariat has renewed focus on performance management in the public sector through a new Performance Management Directive introduced in 2013.
While the federal government already had a performance management program in place, deputy heads and managers expressed a need for further support in managing employee performance. Employees also requested tools to help them better understand organizational objectives and achieve goals.
“The new Performance Management Directive was introduced to ensure that a mandatory performance management program was in place for all employees to recognize and reward excellent performance, work to maximize performance, and to manage unsatisfactory performance,” said the board.
“The goal of any employer should be to recognize good work and encourage excellence. That results in a more dynamic and productive workforce and, ultimately, better service for Canadians.”
Key requirements include:
• Departments and agencies must establish performance management programs as set out in the directive.
• All public servants in core public administration must have performance agreements in place by April 1, 2014.
• All managers and supervisors responsible for evaluating employee performance must successfully complete training in performance management.
• Probationary periods must be actively monitored and tracked — there must be an attestation that the employee has passed the probationary period.
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